Making Tax Digital is, in our opinion, the most significant aspect of the UK Government’s plans to make it simpler for businesses to get their tax correct, while also keeping on top of their affairs.
In a nutshell, this policy makes fundamental changes to the way the tax system operates, transforming tax administration into a more effective, more efficient, and easier procedure for taxpayers.
The immense accuracy that digital records provide, along with the assistance built into cloud accounting software (such as Xero and QuickBooks software) will dramatically reduce the amount of tax lost to avoidable errors. The primary reason for this is that information is sent directly to HMRC from your digital records, entirely traversing the possibility of transportation errors.
VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) are now required to follow the Making Tax Digital rules by keeping digital records and using software to submit their VAT returns.
If you are below the VAT threshold you can voluntarily join the Making Tax Digital service now.
VAT-registered businesses with a taxable turnover below £85,000 will be required to follow Making Tax digital rules for their first return starting on or after April 2022.
Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2023.
The government plans to provide businesses with an opportunity to take part in a pilot scheme for Making Tax Digital for Corporation Tax, but will not be enforcing its usage before 2026.
If you are interested in a more in-depth review of the policy as a whole, the government has published a comprehensive evaluation of the introduction of the Making Tax Digital programme, which contains all the useful research to date.
As well as learning about the UK Government’s policy on Making Tax Digital by 2023, we recommend that you take a look at our other cloud accounting related blog posts for guidance:
For your free consultation on personalised cloud accounting, simply get in touch with the Gow team. Both new and existing clients welcome!
We are also happy to answer any questions that you may have concerning Making Tax Digital.
Call us on 01254 589799.